Smithfield Foods

Smithfield Foods is based in Smithfield, Virginia. The company is the world's largest hog producer and pork processor, largely due to acquisitions. Products include over 50 brands of fresh pork and processed pork products sold under the brand names Armour, Stefano's, Farmland Foods, John Morrell, Lykes, Patrick Cudahy and Cumberland Gap. Smithfield's specialty foods division offers nuts, desserts and dressings. The company distributes its meats in the United States and internationally; predominately in Mexico, Western Europe, the United Kingdom, Poland and Romania. Smithfield ranks number 163 in Fortune 500 companies. [1]

In the fiscal year ending in April of 2010, the company reported sales of approximately $11.203 billion dollars and had 48,000 employees.[2]

Overview

Smithfield controls 26% of the U.S. pork market, raising 14 million pigs at it's facilities and killing 27 million of the 60 million that went to slaughter in 2006. [3]

The company has long been the world's largest pork packer. More recently it has become the world's largest hog producer. The combination of farming and meat packing is unique and has radically altered the pork business. In recent years the company has also acquired beef operations. It is the fifth largest beef packer and a leading producer of deli meat and processed foods. Since 1981 when it was a regional pork producer, it has made over 20 acquisitions and expanded operations and exports abroad. The company's growth has been largely unimpeded by anti-trust actions. A 2003 acquisition of the bankrupt Farmland Foods elevated Smithfield from 20% to 27% of the market; without a murmur of protest from the U.S. Department of Agriculture (USDA). The Environmental Protection Agency (EPA) campaign against massive water pollution from its North Carolina and Virginia factory farms was soft pedaled; in spite of hog waste run-offs that turned rivers into toxic dumps. The company also struck down state laws prohibiting meat packers from owning the animals they slaughter.

Smithfield's hog farmers are employees running large, centralized factories specializing in one product. The demise of the Farmland pork cooperative may have been the last gasp of the independent farmer. While other meat packers have an oligopoly toward their farmers, Smithfield owns them outright. [4]

Employee & human rights issues

Anti-union, intimidation & safety

In 2004, the National Labor Relations Board found that Smithfield had used intimidation to derail a 1997 union election at the Tar Heel plant through threats, spying and firings. A federal appeals court upheld a 2006 decision which concluded that the company had engaged in "intense and widespread coercion” and ordered the reinstatement of four fired workers. One of the fired workers had been beaten by the plant's police on the day of the election. The union failed to organize that year.

UFCW & Paula Dean

In the Spring of 2007, the United Food and Commercial Workers Union (UFCW) attempted to get celebrity chef Paula Deen to sever her ties with Smithfield. Ms. Dean had been a paid spokesperson since the Fall of 2006 and is the first personality to become entangled in a union dispute. During a sold out book tour in New York City in April, approximately two dozen people supporting the unionization of the huge Tar Heel, NC plant, held a prayer vigil out side of the Museum of Natural History. As she responded to audience questions, a union member tried to speak and deliver a letter. Leila McDowell and former Smithfield employee Lenore Bailey were ushered out. According to a news release from Ms. Dean:

“Now, I’m not an expert on the union situation but here’s what I do know: I know the folks at Smithfield care about their employees and work hard to support the communities where they live, work and raise their families.”

After the incident, the North Carolina Council of Churches sent a letter to Ms. Dean describing conditions at the plant. The letter included a report based on data from the Occupational Safety and Health Administration (OSHA). According to the data, worker injuries were up 200 percent since 2003. The company claimed its injury rate was no different from the industry average. The union vowed to continue demonstrating at Ms. Dean's book tours, on a larger scale.[5]

Toxic holding pond deaths

There have been several deaths related to Smithfield's toxic holding ponds or lagoons. According to a December of 2006 expose by Jeff Tietz published in Rolling Stone, after a driver and his truck went over the side of a Smithfield lagoon in Oklahoma, it took almost three weeks to retrieve his body. In 1992 a worker repairing a lagoon in Minnesota began choking to death on the fumes. After another worker dove in after him, he also succumbed to the fumes and both died. In Michigan a worker overcome by fumes from a lagoon fell in. Several relatives dove in to save him and were also overcome by fumes and died. [6]

Animal welfare issues

Sows in gestation crates

According to one Smithfield worker describing the brutality:

“The line is so fast that there is no time to sharpen the knife. The knife gets dull, and you have to cut harder."

Pigs live by the hundreds or thousands in warehouse-like barns, in rows of wall-to-wall pens. Sows are artificially inseminated, fed and delivered of their piglets in cages too small to turn around in. Forty fully grown 250-pound male hogs often occupy a pen the size of a tiny apartment and trample each other to death. There is no sunlight, straw, fresh air or earth. Floors are slatted to allow excrement to fall into a pit underneath. Many things besides excrement can wind up in the pits, including afterbirths, still born piglets and piglets accidentally crushed by their mothers, old batteries, broken bottles of insecticide and antibiotic syringes; anything small enough to fit through the foot-wide pipes that drain the pits. Pipes remain closed until enough sewage accumulates in the pits to create good expulsion pressure; then the pipes are opened and everything bursts out into a large holding pond. Temperatures in hog houses often exceed 90 degrees. The air is so saturated with dust, excrement and chemicals that enormous exhaust must run 24 hours a day. If they break down for any length of time, pigs start to die off. [7], [8]

Cruelty investigation of Smithfield supplier (NC)

From September 13 to November 2 of 2007, an investigator from People for the Ethical Treatment of Animals (PETA) worked as an entry level "herd technician 1" at Murphy Family Ventures pig breeding farms and slaughterhouses, under contract with Smithfield. In the video, pigs have the word "KILL" spray painted on their backs and screech as they're dragged to slaughter with a heavy metal prodder attached to their legs, ears and snouts. Women laugh as they castrate piglets without anesthesia or painkillers. According to the investigator:

"One female employee told me that was her stress relief for the week. That's the type of person doing those jobs. ... The treatment of the baby pigs shook me the most."

He also witnessed piglets' tails being sliced off, (a general practices at swine slaughterhouses). According to PETA spokesperson Matt Prescott:

"We believe that these acts of abuse constitute a violation of state animal cruelty laws. Employees were gouging out the eyes of pigs and violently dragging animals by an ear or a snout or a leg. A supervisor admitted on camera to viciously attacking pigs with metal rods."

The group requested that workers filmed abusing pigs be charged with animal cruelty; a misdemeanor in North Carolina. According to the investigator, he quit the $7 an hour job out of fear that his coworkers had become suspicious, as he was the only one not physically abusing pigs. According to the group, the investigation was originally instigated in August by a tip from a former Murphy Family Ventures employee.[9] According to spokesperson Don Butler:

"Non-conformances to the company's animal welfare policy were found. Appropriate actions have been taken, including termination of those who violated the policy."

Employees caught on hidden camera brutally abusing pigs were fired, though it wasn't known how many. Several were filmed dragging and beating swine, gouging out their eyes and castrating piglets without painkillers. The prosecutor's office in Sampson County, NC opened an investigation after PETA lawyers turned over affidavits and videotapes. According to the PETA employee, speaking with Fox News on December 12 2007:

"(The abuse) happened every day. You can't even capture the full horror of what goes on there."

PETA requested Smithfield and its contractors to more aggressively enforce humane treatment of the animals. They also requested the company install surveillance cameras and conduct regular internal undercover investigations as well as a ban on gestation crates.[10], [11]

Smithfield reneges plans to phase out gestation crates

Sow in gestation crate

In June of 2009, Smithfield announced it could not afford to go through with its highly publicized animal welfare improvements. The company announced it would delay plans to replace “gestation crates” for pregnant sows with more humane “group housing." [12] Previously, in January of 2007, the company had announced a 10 year phasing out of gestation crates. Crates are used to keep pregnant and nursing sows immobile during the course of 3 years of their typically four year life span as breeding sows. During this time, they typically give birth and nurse 5 to 8 litters of about a dozen piglets. All 187 Smithfield owned pig nurseries and Smithfield contract farms were scheduled to move sows to group pens. [13] At the time, Smithfield concluded that the crates could be replaced with group pens without any long term problems or cost increases. According to CEO C. Larry Pope:

"Working with our customers, who have made their views known on the issue of gestation stalls, we are pleased to be taking this precedent-setting step."[14]

McDonalds and Walmart reportly requested that Smithfield and other pig producers quit using gestation crates after a panel concluded they were inhumane and unnecessary. The panel was appointed by McDonald's, as part of a 1994 negotiation with Coalition for Nonviolent Food founder Henry Spira, who died in 1998. [15] (However, McDonald's has ignored advice from its own consultant, that there are reliable sources of of humanely raised cows and pigs if the restaurant chain would commit to purchasing them.) [16]

When Smithfield executives announced plans in 2007 to phase them out, they refused to admit they were inhumane. Rather, they attributed their decision to consumer preference. A sow living in a typical industrial facility will spend the majority of her life confined to these metal and concrete stalls. She will have barely enough room to lie down and not enough room to turn around in. Several states legally banned gestation crates and the European Union (EU) has required farmers to phase out all gestation crates by 2013.[17]

Cruelty investigation of Smithfield supplier (VA)

HSUS undercover investigation of Smithfield Foods. - November 2010

In December of 2010, the Humane Society of the United States (HSUS) released findings from a month long undercover investigation of a Waverly, Virginia contract farm owned by Smithfield subsidiary Murphy-Brown. Breeding sows crammed into gestation crates and barely able to move for virtually their entire lives, engaged in neurotic behaviors such bar biting. Some so incessantly that blood ran from their mouths and coated the fronts of their crates. The sows suffered injuries from sharp crate protrusions and open pressure sores from extreme confinement and immobility. A veterinarian was never seen on the premises during the entire course of the investigation. During the investigation, a barn manager advised the investigator to ignore a sow with a basketball sized abscess on her neck. He then proceeded to cut the abscess open with an unsterilized razor. In another incident, employees used gate rods on a lame sows neck and back in an effort to force her to move. On three occasions, the investigator informed employees that a pig was thrown into a dumpster alive. The animal had been shot in the forehead with a captive bolt gun (to render it unconscious) before being thrown into the dumpster. Other abuses included mishandling and throwing piglets into carts. Prematurely born piglets fell through slats in gestation crates and into manure pits below. According to HSUS President & CEO Wayne Pacelle:

"If this is the best that Smithfield can do, it is evident that there are terrible problems in the nation's pig industry. It is indefensible for Smithfield to allow its sows to linger in crates barely larger than their bodies for months on end. ...Now that Smithfield just posted its highest ever quarterly profit, it's a good time to make a public pledge to honor its previous commitment. The company can no longer claim that economic circumstances don't allow for facility improvements. Other large pork producers, such as Maxwell Foods, are already gestation crate-free, while Cargill is 50 percent gestation crate-free."

Photos and video footage revealed approximately 1,000 large breeding sows. Sows are trapped in their crates for the entire duration of their four month pregnancies. After giving birth, they are moved into a crate large enough to nurse for about 3 weeks before again being artificially inseminated and forced back into gestation crates. In one video, a large, lame pig with the word "kill" spray painted on its back is dragged by the snout after being shot in the head with a stun gun. The struggling pig is thrown into a large trash bin, then breathes heavily as it lay dying and surrounded by dead pigs. According to Dennis Treacy, chief sustainability officer, the company is "conducting its own investigation", adding that:

"We provide regular training to our employees on our animal welfare policies and procedures, and we have zero tolerance for any behavior that does not conform to our established animal well-being procedures."

Veterinarian Richard Wilkes from the state's Department of Agriculture visited the farm subsequent to the findings. Animal welfare expert Temple Grandin was also assisting in the investigation. Law enforcement is set to determine if criminal charges are to be filed. To date, seven states, Florida, Arizona, California, Colorado, Oregon, Maine and Michigan; have legally banned gestation crates. [18], [19]

Environmental issues

Smithfield churns out a sea of waste that has destroyed rivers, killed millions of fish and generated one of the largest fines in the history of the EPA. The company slaughters approximately 27 million hogs per year, each hog with a slaugter weight 50% heavier than a person. The logistical challenge of processing that many pigs per year is roughly to butchering and boxing the entire human populations of New York, Los Angeles, Chicago, Houston, Philadelphia, Phoenix, San Antonio, San Diego, Dallas, San Jose, Detroit, Indianapolis, Jacksonville, San Francisco, Columbus, Austin, Memphis, Baltimore, Fort Worth, Charlotte, El Paso, Milwaukee, Seattle, Boston, Denver, Louisville, Washington, D.C., Nashville, Las Vegas, Portland, Oklahoma City and Tucson.

Smithfield actually faces a more difficult challenge even than transforming the populations of America's 32 largest cities into packages of meat. Hogs produce three times more excrement than human beings. The 500,000 pigs in a single Smithfield subsidiary in Utah generate more fecal matter every year than the 1.5 million inhabitants of Manhattan. Best estimates put Smithfield's total waste discharge at 26 million tons a year (enough to fill four Yankee Stadiums.) Even when divided among the many small units that surround the company's slaughterhouses, this is not a containable amount. [20]

CEO Joseph Luter defeats attempt to clean up pit lagoons

In 1995, when the company was attempting to persuade the State of Virginia to reduce a large fine for the company's pollution, CEO Joseph Luter contributed $100,000 to governor George Allen's political action committee.

In 1998, North Carolina corporate hog farms spent $1 million helping to defeat clean up legislation for the state's open pit lagoons. NC has consistently failed to employ enough inspectors to ensure that hog farms comply to environmental standards. [21]

Fined for violations of the Clean Water Act

In August of 1997, Smithfield was fined 12.6 million dollars for violating the U.S. Clean Water Act in Smithfield, Virginia by a U.S. District Court in Norfolk, Virginia. It is the largest fine ever imposed under the Clean Water Act. Smithfield was dumping hog waste into the Pagan River, a tributary flowing into the Chesapeake Bay. A May 1997 ruling found the company's failure to install adequate pollution control equipment and properly treat waste water resulted in more than 5,000 violations of permit limits. The violations occurred for over five years and degraded the Pagan River, the James River and the Chesapeake Bay. Another ruling found the company had falsified documents and destroyed water quality records. Because the company delayed installing essential pollution control equipment and continued dumping waste into the river for five years, the EPA and the Department of Justice, forced them to build a sewage treatment plant. [22] Smithfield had appealed a series of lower district court rulings, arguing that the United States was barred from suing the company due to an "agreement" with the Virginia Department of Environmental Quality that allowed them to "exceed permit limits". In September of 1999, the 4th U.S. Circuit Court of Appeals upheld the ruling. The panel of three judges unanimously agreed that Virginia’s agreement not to enforce the phosphorous was not part of the company's EPA approved permit. [23]

Smithfield funded study

In 2000, due to widespread environmental concerns about pig farm waste and the odor coming from open pit lagoons, North Carolina commissioned a 5 year study of pig waste management. The state has approximately 10 million pigs, mostly on industrialized farms. It was underwritten in part by 15 million dollars from Smithfield under an agreement with the state's Attorney General's Office. According to the study, alternatives to open pit lagoons would cost at least 20% more, in turn curtailing legislation which would force farmers to phase them out. According to the Chairman of the NC House Agriculture Committee:

"We're sort of back where we started from. The cost is just too high. The average hog farmer couldn't afford it."

He added that a moratorium currently blocking expansion of pig farming in the state was a "good idea."[24]

Sierra Club's "Ten Least Wanted" list

In 2002, Smithfield Foods made the Sierra Club's "Ten Least Wanted" list. Just weeks after the second-largest beef recall in history, the Sierra Club released a report on hundreds of criminal and civil violations of America's largest corporate factory farms. The Rap sheet documented convictions for animal cruelty, bribery, records destruction, fraud, worker endangerment and pollution.

"Despite repeated violations of environmental and public health laws, many of the companies highlighted in the Rap Sheets continue to receive millions of dollars every year from the School Lunch Program and other federal food assistance programs." [25]

International (outsourcing & Swine flu)

Mexico

Smithfield devastates Romanian farm communities. - May 2009

In 1994, the year the North American Free Trade Agreement (NAFTA) went into effect, Smithfield Foods established the Perote operations with the Mexican agrobusiness AMSA (Agroindustrias Unidas de México S.A. de C.V.) In 1999, the company bought the U.S. company Carroll's Foods for $500 million and expanded its operations into Perote, Veracruz, Mexico. The first reports of Swine flu came from Perote, Veracruz, home to Carroll Farms and operated by Smithfield. In early March, local health officials announced a health alert and investigation. According to Perote officials, 60% of the population suffered from flu, pneumonia and bronchitis. Federal health officials dismissed the complaints until April 5, when sanitary restrictions were placed on Carroll Farms. [26] According to the company website the Perote facility raised 950,000 hogs in 2008. [27]

Residents of Perote believed the outbreak to be caused by contamination from pig breeding farms located in the area. They believed that the farms operated by Granjas Carroll polluted the atmosphere and local water bodies, leading to the outbreak. According to residents, the company denied responsibility attributed the cases to "flu." However, according to a municipal health official, preliminary investigations indicated that the disease vector was a type of fly that reproduces in pig waste. It was unclear whether health officials identified a suspected pathogen linked to the outbreak of disease. [28]

Romania

For centuries, from the Hapsburg Empire through Communist dictatorship, peasant farmers in Romania eked a living from hogs, driving horses along ancient pocked roads and whispering ritual prayers on butchering day. Old customs and jobs are dying and the air itself is changing, transformed by Smithfield Foods. Almost unnoticed by the rest of the Continent, the agribusiness giant has aggressively moved into Eastern Europe, assembling networks of farms, breeding pigs and slaughtering pigs on the fast track.

The upheaval in the hog farm belts of Poland and Romania, the two largest EU members in Eastern Europe, is among the Continent’s biggest agricultural transformations. It also offers a window on how a Fortune 500 from Virginia operates out of country. Smithfield has a joint venture in a Mexican hog farm located close to the area where United Nations (UN) scientists are investigating a potential link between pigs and the new strain of human influenza (Swine flu). Smithfield’s global approach is clear. Chairman Joseph Luter III has described it as moving in a “very, very big way, very, very fast.” In less than five years, the company has enlisted politicians in Poland and Romania, tapped into hefty EU farm subsidies and fended off local opposition groups to create a conglomerate of feed mills, slaughterhouses and climate-controlled barns housing thousands of hogs. [29]

In Romania, local farmers had high hopes when Smithfield Foods decided to invest in the country, near the town of Timisoara. However, two years later, it only seems to have caused sanitary and health problems:

"It smells so bad, we can't sleep at night."[30] See also video (right).

Poland & Romania

According to the Smithfield's annual report for 2006, the company plans to nearly double its sow herd in Poland, from 61,000 to 120,000 head. If accomplished, it will produce about 2 million hogs in the country.

In nearby Romania, Smithfield plans to increase annual pig production to 3.6 million and increase its breeding herd from 32,000 to 200,000. [31]

Violation of anti-trust laws

In November of 2004 Smithfield was fined 2 million dollars in civil penalties for twice failing to comply with premerger notification requirements before making stock acquisitions from its competitor, Iowa Beef Processors (IBP) in 1998 and 1999. The company claimed that its IBP stock acquisitions were exempt from filing requirements as they were "solely for the purpose of investment." However, according to the Justice Department, the exemption did not apply as Smithfield was actively considering merging with IBP at the time. According to J. Bruce McDonald, Deputy Assistant Attorney General of the Department's Antitrust Division:

"Acquisition of stock in a firm that is also being considered as a takeover target or merger partner is not 'solely for the purpose of investment' under the HSR Act and is not exempt from the filing requirements. Ensuring strict compliance with the Act is crucial for effective antitrust enforcement. The Department will continue to closely monitor antitrust compliance in agriculture sectors."

In the fiscal year ending in 2003, Smithfield's revenue was in excess of $9 billion. At the time, IBP was the nation's second largest pork packer. The company is now a wholly owned subsidiary of Tyson Foods. [32]

Financial

"Difficult operating environments" in its hog production and fresh pork units led to an incurred loss of $107.7 million during in first quarter ending in August of 2009. The company recorded a loss of $13.2 million for the same period the previous year. Sales for the quarter were $2,715 million compared with sales of $3,141 million for the first quarter of fiscal 2009. [33]